Category Archives: Payroll

Small Business Employee Remuneration

Business Intelligence, Payroll, sme

Coming up with the ideal small business employee remuneration plan and benefits package can make a huge difference when it comes to attracting and retaining talented employees for your business. From statutory minimum wage requirements to benefits packages, here’s what you need to know to get going.

Employee Remuneration

Apart from developing a pay matrix for each position there is a lot more to consider for the small business owner.

As a small business owner, you’ll want to find simpler ways of calculating and paying salaries without taking up much of your precious time. There is need to comply with all employment related regulations governing businesses. It is also important to craft a benefits package that attracts and retains talent in your business.

How should you go about in designing a remuneration plan? Here are some of the things you need to look at;

Minimum Wages: Prescribed wages that you should be paying your Employees

Minimum wages are pay scales that are set by National Employment Councils that bring together employers, labour and government. The minimum wages give you a starting point in coming up with your own pay matrix. You may not pay wages that are below the set NEC minimums for each position.

It is therefore important that you know which National Employment Council (NEC) your business falls under because pay scales differ for the different industries.

Designing your Employee Remuneration Plan

Once you determine the minimum wage requirements in your industry sector, you need to come up with an employee remuneration plan tailored for your business. There is no one size fits all remuneration plan, what is right for one company may not apply for another. Moreover, you would want to come up with your own unique plan that addresses your business needs to attract and retain talent as well as enhance competitiveness. Goals and needs of your business should be the guiding factor when coming up with a remuneration plan.

The most common types of remuneration plans include:

  • A basic salary determined for each job title or position (may include a range with a minimum and maximum to accommodate for promotions)
  • Basic salary plus commission for employees who are encouraged to make sales and reach goals, but still receive base pay
  • Commission-only remuneration plans for sales people who must perform in order to get paid

From your experience and industry knowledge, you most probably know the standard remuneration scales in your industry. For example, while a retail shop may offer a commission to entice sales employees, this same model may not apply for a small fast-food restaurant.

If you’re not sure, you can consult the NEC for your industry and other resources such as Salary Survey reports produced by Human Resources Consultants and Employment Agents to find out what typically works best in your particular industry. It will help you make sure what you’re offering is competitive.

How Do You Calculate Remuneration?

There is no exact science to calculating employee remuneration, but again, research can help you determine the median salary of people working in the same or similar roles at other companies.

You need to come up with the maximum amount you can afford to pay for each job position. Set rates that you are comfortable with and be guided accordingly by your business cash flows and budget. You also need to value each role in your business. You may need to raise remuneration levels for key roles in order to attract and retain the right employees.

Next, you need to figure out the minimum salaries so that you remain competitive. The statutory minimums set by your industry NEC may no longer be competitive in the market owing to inflationary factors. You therefore need to be well researched and up-to-date with remuneration trends in your industry in order not to lag behind.

Coming up with employee benefits

There are a few employee benefits that you are required to provide by labour laws:

  • National Social Security Authority (NSSA) contributions, namely Pensions and Other Benefits Scheme (POBS) and Accident Preventions and Workers Compensation (APWC) contributions.
  • Leave benefits, as stipulated in labour laws

Benefits such as health insurance (Medical Aid) and funeral assurance are optional but may be key in attracting and retaining good employees. Other benefits can include items such as staff discounts on purchase of your business’s merchandise, subsidized meals or staff canteens and staff transport among many others.

How Do Small Businesses Pay Employees?

The final piece of the employee remuneration puzzle is how you will actually calculate and issue out salary payments and pay slips to your employees. You will acknowledge that the take home salary paid out to employees in not equal to the gross salary. Payroll taxes and other deductions need to be accounted for before coming up with the final net salary payable. It therefore follows that a business should have a system for calculating salaries. A lot of small businesses make use of manual excel spreadsheets to compute salaries but these tend to cumbersome and difficult to administer. It is highly recommended that you adopt a payroll system to help you automate salary computations and produce various payroll reports. Find out more about how Izzypayroll can help you simplify payroll computations and administration for your small business.

You may also read the following article outlining why your business needs a Payroll System; Payroll Management in small businesses

Defining Payroll Software for the Small Enterprise in Zimbabwe

Payroll

What is a Payroll Software?

Payroll software is a software that assists with calculating employee compensation for work performed during the course of employment. Payroll software can be a standalone system or can be part of an all-encompassing HR management system.

In simple terms, payroll software helps with calculating employee salaries. The software then generates employee salary slips and can be utilized to make direct deposits of funds into employee bank accounts. Payroll taxes and deductions are also calculated and withheld by payroll programs in coming up with the net salaries payable to employees in a particular period.

Why should a small enterprise acquire Payroll Software?

Every enterprise or organisation with employees must pay salaries or wages every month, fortnight or every week. Because payroll calculations must be done accurately and on a regular basis it is prudent for small enterprises to invest in a system that automates these processes. Payroll software helps to curtail errors and improve statutory compliance as well as save time that might otherwise have been underutilized performing manual payroll computations.

In-House Payroll versus Outsourced Payroll

In the not so distant past, outsourcing payroll was seen as a way to avoid hiring a full-time resource dedicated to HR and payroll or decreasing productivity by delegating payroll to an existing employee who would then double up as the payroll officer. Outsourcing payroll is still common practice among businesses but using your own payroll software is now a viable alternative.

With the advent of simpler and more user-friendly payroll software systems that are becoming more and more accessible by the day, even small enterprises are now able to run in-house payrolls without having to spend endless hours on payroll processing. Businesses enjoy greater control over their payroll process by running an in-house payroll system. Greater flexibility is enjoyed thereby allowing the business to easily make changes when need arises.

Payroll Software Program Benefits

If payroll is being processed manually, automation by way of investing in payroll software will help to cut back on costs, eliminate errors, and avoid shortcomings on compliance issues. Processing of payroll will take a fraction of the time it takes to do the same on a manual payroll system thereby freeing up employees to engage in other value adding activities. The existence of payroll software in an organisation makes it easier to adapt and take on more employees as it expands.

Moving payroll from a third-party outsourcing arrangement to in-house can save money, eliminate the chances for miscommunications regarding payroll matters, and minimize the number of vendors that it is necessary to deal with regularly.

Payroll Software Mitigates Compliance Risk

Calculating company taxes and understanding what reports to file can be confusing for the small business, missing deadlines for these items can attract interest, punitive penalties and sometimes garnishes.

Payroll software helps businesses by providing reports required for various payroll taxes effortlessly. Reports and tax returns are automatically generated by systems and available to users on demand.

What Does Payroll Software Do?

Stores Company Payroll Information

Payroll software stores and tracks company information about employee compensation and deductions for the financial year. Employees’ pay rates, hours worked, other pay information are stored in the system and used to calculate gross earnings on a monthly basis.

Calculates Deductions and Net salaries

After the gross earnings has been established, payroll software then automatically calculates deductions such as income tax (PAYE), NSSA Pension, NEC, and Trade Union. Deduction amounts are automatically subtracted from gross earnings to come up with net earnings to be deposited in employee bank accounts.

Prepares Payroll Tax Reports

Payroll software can automatically generate tax reports that are needed by employers, employees and payroll tax authorities. Common reports that can be generated include PAYE return (P2 form), NSSA return (Form P4A), NSSA Monthly Payment Schedule of Employees (Form P4), NSSA P16 Year to Date Report, Employee Tax Certificate (P6 form) and ITF 16 Annual Return.

Keeps Payroll History Effortlessly

Keeping payroll history with a manual system can be difficult and requires a lot of storage for manual paper based reports and files. Keeping history with payroll software is effortless and requires little or no physical space as information is store electronically in a central database. Old payroll files from prior years can also be accessed easily.

Determining your Business’s Needs

There are numerous software programs available and all of them are unique. A business needs to be sure about what it requires from payroll software. Companies that are smaller and do not expect to grow rapidly may wish to invest in less expensive payroll software that is limited strictly to payroll functions. This will allow them breathing space and allow for use of scarce resources in business development endeavours.

Companies that are large or are growing rapidly may wish to invest in payroll software systems that are integrated with other aspects of planning and human resources management, such as time and attendance software, and scheduling. Cost considerations also come into play, some systems come with annual or quarterly licencing requirements whilst others offer once off perpetual licences. It is also important to consider how many employees a payroll software solution can handle and factor potential growth. It is also worthwhile to examine the skills set available in the company and determine if there is capacity to operate the software. Some software is a bit more complicated than others and may require more specialized skills and training for one to be able to operate it. Proper needs assessment guided some of the issues highlighted above and other pertinent issues relevant to a business must be carried out in order to come up with an informed decision.

Please visit the following websites to learn more about Income Tax (PAYE), NSSA pension and other payroll taxes;

National Social Security Authority (NSSA)

Zimbabwe Revenue Authority (ZIMRA)

Zimbabwe Manpower Development Fund (ZIMDEF)

Izzypayroll

Verifying data in excel – example

Business Intelligence, Payroll, , ,

Joyleen verifies data

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Click the link below to download the accompanying workbook.

Data verification example

Madota Limited has entered into an agreement with Bank Izzy Bank to provide payroll banking services for the company and all of its workforce. After accounts for all 300 employees have been opened, Joyleen receives a printed document with the list of all employee bank account numbers. In order to capture the information in Madota’s HR system, Joyleen needs to convert the data into a soft copy. She therefore assigns an HR intern to reproduce the list in excel. After the list has been typed, Joyleen has to verify if the account numbers are complete. Upon browsing the document, Joyleen notices that some of the account numbers have fewer or more digits than the standard length. She therefore needs to quickly identify all account numbers that to do not meet the specified length without having to go through each account number. Joyleen was advised by the bank that all account numbers consist of 10 digits.

How is Joyleen going to achieve this?

Analysing excel data – Joyleen’s Predicament, can you solve it? – Solved

Business Intelligence, Payroll, ,

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Joyleen’s Predicament

Please download the accompanying workbook to solve the problem. Workbook link is provided below.

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Download the solution at the end of this article.

Simba and Joyleen work for Madota Limited in Finance and HR departments respectively. Joyleen has been asked to carry out an earnings analysis for the past 3 years for each employee and has managed to extract data presented in the above report (see spreadsheet provided), TABLE A, from the HR system with all 300 company employees (here we have provided just an extract)

Joyleen then realises that the HR system can only present the data for the year, department and employee in one column only but the report required must have those in individual columns. Using her excel skills, she would have been able to use the text to columns function in excel to separate the 3 columns but she requires a dynamic solution that uses formulas because there is a likelihood that the same report will now be run on a regular basis. She just needs a template on which she will paste the source data and the formulas do the work for her without repeating the text to columns process.

Joyleen decides to get help from Simba in Finance, Simba is known in the organisation for his fairly advanced excel skills.

The question; If you were Simba, how would you solve the above and provide a permanent solution for Joyleen? Please write your formulas in TABLE B – SOLUTION”

For further practice, you can attempt to fill in TABLE C, separating the surnames and first names. Enjoy!

For those interested, the solution to this problem will be shared on this page via a download link to the solution workbook at a later date, stay tuned.

Download the solution here